Labour has condemned the UK Government’s plan to cap increases in most working-age benefits at 1%, claiming that working families would take the biggest hit.

It takes nearly #1m to qualify for the wealthiest 10% of people in Britain,

Labour has condemned the UK Government’s plan to cap increases in most working-age benefits at 1%, claiming that working families would take the biggest hit.

The attack on the coalition government’s plans came ahead of Tuesday’s vote on proposals to cap increases in Jobseeker’s Allowance, maternity pay and tax credits for three years from 2013-14.

A two-year cap on increases in child benefit, housing benefit and universal credit is planned from 2014-15.

The highly respected Institute for Fiscal Studies (IFS) said the proposals would cut the value of benefits at a time of falling earnings and expose the country’s poorest to the risk of inflation. Plaid Cymru said today’s vote could create a “disaster for thousands of vulnerable people”.

Former Labour Chief Secretary to the Treasury Liam Byrne described the move as an “attack on working families, pure and simple”.

In Wales, 226,400 families receive working tax credit. In addition, as of November 4,580 people aged 18 to 24 had claimed Jobseeker’s Allowance for 12 months-plus, and 5,935 people aged 25 and over have claimed the benefit for two years-plus.

Mr Byrne, now Shadow Secretary of State for the Department for Work and Pensions, said working families were paying the price for Government incompetence.

Warning that the move could increase child poverty, he said: “George Osborne and IDS have tried to pretend that tomorrow’s uprating Bill is all about an attack on the slackers. That is a lie; it is a big lie.

“It is an attack on working families, pure and simple. Sixty percent of the people who are hurt will be in work; about £4bn will be taken out of tax credits; and that will hurt working families all over Britain.

“Be under no illusions. This is a strivers’ tax. It’s highway robbery and George Osborne and IDS are frankly conmen pretending to be taking money from the undeserving poor and actually, in truth, they are hitting working families hard.”

However, a spokesman for the Department for Work & Pensions said: “In difficult economic times, we’ve protected the benefits of disabled people and pensioners who have little means to increase their income. We’ve also committed to helping people who claim working age benefits and tax credits and will increase this support by 1%.

“This was a tough decision, but it will ensure that the welfare budget is sustainable over the longer term and will continue to help the people who need it most.”

Plaid Cymru Arfon MP Hywel Williams said: “The coalition’s proposals that form the benefits up-rating Bill signal a disaster for thousands of vulnerable people and serves as a reminder of this government’s intention to dismantle the welfare state. These plans would affect Wales disproportionately due to our high number of benefits claimants and do little to tackle the root causes of long-term unemployment.

“Many Welsh constituencies are bearing the brunt of the coalition’s failed economic policies. Just one example is Blaenau Gwent where there are 11.3 JSA claimant per job vacancy – compared with an UK average of 3.8. The figure for Rhondda is even more startling at 20.9.”

Cardiff South & Penarth Labour MP Stephen Doughty called for an alternative, saying: “Quite simply, they are introducing a tax on strivers – hard-working people trying to make a difference for their families. Because the economy has flat-lined, George Osborne will now be borrowing £212bn more than he planned and it’s working families here that will be paying the price of his economic failure.”

He added: “The guarantee would mean that every adult who’s been out of work for two years would be offered a job. And they would have to take it or lose their benefits. This could help nearly 6,000 people across Wales.

“We would pay for this by making the reducing the tax relief on the pensions of people who earn over £150,000. When times are tough it cannot be right that we subsidise the pension contributions of the top 2% of earners at more than double the rate of people on average incomes paying the basic rate of tax.”

The IFS stated in its analysis: “Of 2.8 million workless households of working age, 2.5 million will see their entitlements reduced, by an average of about £215 per year in 2015-16.

“Of 14.1 million working-age households with someone in work, seven million will see their entitlements reduced, by an average of about £165 per year.

“This policy achieves savings through an across-the-board reduction in the real value of benefits for people of working age at a time when real earnings have been falling. But we don’t know two things.

“First, the actual effects of the bill on real benefit rates are unknown, because they depend on future price levels. This exposes the poorest in society to inflation risk.

“Second, we don’t know the government’s view on how benefit rates should be indexed in the longer run. We ought to.”

Mr Byrne said there was in-fighting and chaos at the heart of the UK Government.

He said: “George Osborne has delivered a double-dip recession and Iain Duncan Smith has comprehensively botched welfare reform at DWP. So he’s presided over a world where the Work Programme is literally worse than doing nothing and universal credit is now descending into universal chaos.

“They’ve had to slip the timetable back dramatically. There are massive IT problems.

“And what’s now happening is Iain Duncan Smith and George Osborne are blaming each other. Now, David Cameron had the chance to fix this at the reshuffle.

“He wanted to get IDS out and IDS refused and decided to stay. And George Osborne could have changed things – he could have given us a proper growth plan and he didn’t.

He continued: “At the last Budget George Osborne had a real problem. The welfare revolution had failed, the welfare bill was going up, and he needed a way of paying for it so what he dedicated to do is hit working families and that’s what [this] Bill is all about.”

Predicting that the move could cost the Conservatives victory at the next election, he said: “We think George Osborne was in search of a welfare dividing line and has ended up costing the careers of a lot of his colleagues. On average there are about 6,000 people on tax credits in every Conservative constituency and there’s about 120 Tory constituencies where the number of people on tax credit is bigger than the Tory majority.”

A Wales Office spokeswoman defended the proposals, saying: “Most benefit levels have risen significantly faster than average earnings since the financial crisis, 20% compared to 10%. Even after three years of 1% increases, on current forecasts out of work benefit levels will still be higher than if they had grown at the same rate as average earnings since the financial crisis began.”

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